GEORGE MAGNUS: These 5 Big Demographic Trends Are Shaping The World Right Now

The future of an economy is determined heavily by its evolving
demographics.

Knowing how young or old a country's population will be is
crucial for investors and businesses.

Many point to population growth in developing nations as a source
of rising domestic demand. But there's a lot more to be
considered. For example, the Arab Spring was an extreme, but
important reminder of what can happen when you have a young and
able workforce with little access to jobs.

1. The ratio of
children to older citizens is declining: The
ratio of children to older citizens stands at about 3:1 but is
declining. By around 2040, there will be more older citizens than
children. By 2050, there will be twice as many older
citizens as there are children. Some exceptions to this however
are China and Russia.

"The number of over-60s in the rich world is predicted to rise by
2.5 times by 2050 to 418 million, but the trajectory starts to
level off in about 20 years time. Within this cohort, the number
of people aged over 80 will rise six times to about a 120
million.

"In emerging and developing world, the number of over 60s will
grow by more than 7 times to over 1.5 billion by 2050, and behind
this, you can see a 17-fold increase in the expected population
of those aged over 80, to about 262 million."

2. There has
been a sea-change in the nature of illness to non-communicable
diseases: One of the consequences of rapid aging
and rising longevity is the "sea change in the nature of illness
and disease and therefore scientific and pharmaceutical
businesses," said Magnus. "I'm referring, of course, to what the
World Health Organization has called the invisible epidemic of
non-communicable diseases, which is now responsible globally for
about 60% of deaths, and nearly half of the actual and effective
life years due to disability."

"By 2030, depression is expected to become the biggest single
cause of disability affected life years, which is a composite
measure of years of life lost to premature death and
disability. The arrows show a complete turnaround in the
principal burden of disease."

Conference Board/George Magnus

3. The speed of
aging is rising rapidly in emerging economies:
The time taken to double the share of those over 60 years old
from 7% to 14% of the population took a long time in western
countries. But the emerging markets are aging "at an astounding
pace," according to George Magnus.

In France it took over a century to cross this milestone. And in
most developed countries it took about 40 - 80 years. In emerging
markets, however, the process is playing out in about 20 years
with China taking the lead in speed. "It's this that gives
that rise to the common mantra of 'growing old before you get
rich,'" said Magnus.

What this means is that emerging markets have far less time to
build the financial infrastructure and social security systems to
deal with consequences of an aging and rising old age dependency.

Conference Board/George Magnus

4. Old age
dependency ratio is rising rapidly in Japan, European countries,
but at a slower pace in Anglo Saxon
economies: The rising dependence of those
over 65 on the working age population is referred to as the old
age dependency ratio. This is a product of weak fertility and
rising longevity.

The old age dependency ratio in countries like Germany, Japan,
Italy, Spain is expected to rise rapidly. These countries are
characterized as the "hares" because of the rapid progression of
old age dependency. The number of workers per older citizen is
expected to fall from about 3-5 today to about 1.5 by the
mid-century mark.

Meanwhile, the Anglo-Saxon economies like Sweden and France are
"tortoises" by comparison. Here the support ratio will fall from
4-5 workers today, to about 2-2.5 by the mid-century. This is
because of higher fertility rates and a more open immigration
policy..

Conference Board/George Magnus

The tortoises of the emerging markets have a support ratio of
10-20 workers per older citizen, and this is expected to get to
where developed countries are by mid-century. But in some
countries in sub-Saharan Africa, the pace of aging is much slower
than say in Indonesia, Turkey and Brazil.

India is a "demographic darling" because one-third of its
population is aged under 14, and its working age population will
grow in the next 20 years, to more than the existing stock of
working age people in Western Europe today.

Conference Board/George Magnus

5. It's getting
harder to exploit demographic dividend: This is a
phase that countries go through when child dependency is falling
and the working age population is expanding. But they're also in
a phase just before old age dependency starts to rise. Typically,
this phase comes with stronger trends in income, savings,
investment, and technical progress. This is where where other
emerging markets countries hope to be in the next few decades.

Once the old age dependency ratio starts to rise, however, the
demographic dividend can't be exploited and it tends to drag on
growth. The demographic dividend creates the opportunity to draw
on these benefits, but doesn't guarantee it. Exploiting your
demographic dividend depends on four Is, according to Magnus —
better institutions, investment climate, infrastructure, and
innovation.